Hambros Australia Ltd & Ors v The Duke Group Ltd (In Liquidation) & Ors [2005] HCATrans 592 (11 August 2005)

--

Hambros Australia Ltd & Ors v The Duke Group Ltd (In Liquidation) & Ors [2005] HCATrans 592 (11 August 2005)

Last Updated: 26 August 2005

[2005] HCATrans 592

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Adelaide No A16 of 2005

B e t w e e n -

HAMBROS AUSTRALIA LIMITED, HAMBROS SECURITIES LIMITED (IN LIQUIDATION), DAVID OWEN EWART-JAMES AND JOHN ANTHONY CORCORAN

Applicants

and

THE DUKE GROUP LIMITED (IN LIQUIDATION), ALAMAIN INVESTMENTS LIMITED (IN LIQUIDATION), TREVOR BARKER, MICHAEL DAVID ABRAHAMS AND PETER IAN DENT

Respondents

Office of the Registry
Adelaide No A18 of 2005

B e t w e e n -

TREVOR BARKER, MICHAEL DAVID ABRAHAMS AND PETER IAN DENT

Applicants

and

THE DUKE GROUP LIMITED (IN LIQUIDATION), ALAMAIN INVESTMENTS LIMITED (IN LIQUIDATION), HAMBROS AUSTRALIA LIMITED, HAMBROS SECURITIES LIMITED (IN LIQUIDATION) DAVID OWEN EWART-JAMES AND JOHN ANTHONY CORCORAN

Respondents

Applications for special leave to appeal

GLEESON CJ
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT ADELAIDE ON THURSDAY, 11 AUGUST 2005, AT 9.33 AM

Copyright in the High Court of Australia

MR J.S. HILTON, SC: If your Honours please, I appear with my learned friend, MR G.K.J. RICH, for the applicants in matter No A16/2005 and for the third to sixth named respondents in matter No A18/2005. (instructed by Piper Alderman)

MR W.J.N. WELLS, QC: If the Court pleases, I appear with my learned friend, MR N.G. ROCHOW, for the third and fifth named respondents in the first matter and for the first and third named applicants in the second matter. (instructed by Lancione Partners)

MS W.A. HARRIS: If the Court pleases, I appear with my learned friend, MR M.G. EVANS, for the first respondent in each of the matters. (instructed by DMAW Lawyers)

GLEESON CJ: Yes, Mr Hilton.

MR HILTON: Thank you, your Honours. By any measure, we submit this was and is an exceptional case and Justice Perry speaking for the Full Court at paragraph 155, with whom the other judges in the Full Court agreed, erred in concluding otherwise. We are not aware and the respondent does not cite any case in which the collocation of issues that arose from the facts as found by the learned Chief Justice sitting as the trial judge had previously arisen.

GLEESON CJ: Not the trial judge.

MR HILTON: The application judge, the first instance judge. Not the trial judge but the judge dealing with the interlocutory application for the proceedings to be stayed as an abuse of process.

GLEESON CJ: There has never been a defence filed in either of these matters, has there?

MR HILTON: The answer to that question is, because our applications for stay have failed, the proceedings have proceeded and we have very recently filed a defence.

GLEESON CJ: We do not have that though, do we?

MR HILTON: No, your Honours, it does not arise.

CALLINAN J: Mr Hilton, I know Chief Justice Doyle suggested a number of possible explanations for the liquidator’s delay. What did the liquidator say by way of explanation?

MR HILTON: Your Honour, not much more than that which Chief Justice Doyle reported in his judgment.

CALLINAN J: That he wanted to concentrate on the other proceedings.

MR HILTON: Yes, that is right, he was busy.

CALLINAN J: Did he say that there was some shortage of funds that precluded him from pursuing it?

MR HILTON: Your Honour, this is what he said. I will summarise it. May I just put it this way, your Honour. Why this is an extraordinary case is I would like any case ever to be cited where a liquidator started the proceedings, the first ever proceedings against the accountants, with the meagre sum of $34 million in his pocket that he had been paid as a result of still earlier proceedings involving the reverse takeover.

CALLINAN J: When did that sum come into his hands?

MR HILTON: That sum came into his pocket, as Chief Justice Doyle recorded, just before what I would call the proceedings against Nelson Wheeler were kicked off, so February 1992. That is common ground. He received $34 million from yet earlier sets of proceedings. He kicked off the proceedings. What appears to have been done – and this is common ground – is that while the proceedings were on foot, in order to keep the creditors happy he started paying distributions to the creditors – four or five distributions of funds to the creditors, thereby denuding himself of moneys with which, so he would say, to pursue the proceedings.

CALLINAN J: It is right, is not, that on the best possible view he knew everything he needed to know by what, 1995?

MR HILTON: We would submit by July 1995 he clearly demonstrated that he knew everything and Chief Justice Doyle so found. In fact, we would submit, and we demonstrated that by a document about which we did not know until the commencement of the interlocutory hearing when it landed on the Bar table, the key document - the liquidator never referred to that in his affidavit but the key document out of which acorn this whole oak tree has grown he had in 1994, so a year before, and he then, as it were – but clearly from the cross-examination of Mr Ewart-James he knew everything.

CALLINAN J: Does he say he came into funds after – when did he start the action?

MR HILTON: Which action, the - - -

CALLINAN J: This action. The action with which - - -

MR HILTON: This action he started in two countries. He started one action in the United Kingdom in October 2002 and with an identical statement of claim for the United Kingdom proceedings on 13 November 2002.

CALLINAN J: Did he say that he had suddenly come into some funds before October after denuding his fund for paying the creditors, or what?

MR HILTON: To be fair to him, he said that what happened was that he had got a substantial payment from the Nelson Wheeler accountants. That is the case that went to this Court, your Honour. That is Pilmer v Duke. At the end of that case he got moneys from the accountants. Now, your Honour, you are testing my memory - - -

GLEESON CJ: When was that approximately?

MR HILTON: To be fair to me, I do not remember that detail. I infer that it was before 2002 but I cannot – the affidavit – it is a while since I have read it but that is the history of the matter.

CALLINAN J: There is one other matter I want to ask you and I will not ask you anything more then.

MR HILTON: I can have it looked up, your Honour.

CALLINAN J: The defence of limitations by analogy remains available if you can make it out, is that right, as does laches.

MR HILTON: The answer to both those questions is yes. Those issues have been deferred to the trial.

CALLINAN J: There would be an estoppel against you in trying to raise any question of oppression, is that right?

MR HILTON: I am so sorry, I just having problems hearing your Honour.

CALLINAN J: Yes. There would be an estoppel against you if you tried to raise any issue of oppression, apart from the extent to which it is relevant to laches?

MR HILTON: Your Honour, we would submit that the time for dealing with the abuse of process issue on the grounds of vexation oppression is now.

CALLINAN J: No, but assuming you were not to succeed here, you would not then be able to raise abuse of process, is that right?

MR HILTON: That would be our submission. If I was advising a client in the abstract that would be my submission. However, one of the errors that we point to in the judgments below is that there is – despite their Honours saying below they did not defer it until the trial, we actually submit that in effect their Honours deferred the issue of abuse of process to the trial.

CALLINAN J: If you are right about that then, it becomes a less attractive application for special leave, does it not?

MR HILTON: No, your Honours, because, in our submission, that in itself is a fundamental error of principle.

GLEESON CJ: What do you say will be involved in the issues of laches?

MR HILTON: At the trial?

GLEESON CJ: Yes.

MR HILTON: Your Honours, so far as the issue of laches at the trial is concerned, obviously we will run the issue that society – Société-Générale – would have paid less for the Hambros business than it otherwise would have paid and we will run some of the other issues that we are running now but we are in a very – by the failure of the courts to grasp the nettle of abuse of process, the continuation of a proceedings have placed us in a paradoxically and manifestly unfair position for no reason of our doing for this reason.

Incidentally, just so that your Honours understand the background about the quantum of the claim, according to the latest pleadings, the quantum of the claim, as it were, at the start of the proceedings is in excess of $220 million. It is the quantum of the claim. So far as this issue of laches is concerned, we are going to be placed in this paradoxical position. On the one hand, we are going to have to call defendants who, doing the best they can to resist the plaintiffs’ claim, will say, “Well, to the best of my recollection I didn’t know this and I didn’t know that”, and so on. At the same time, on this approach, we are going to have to say, “Well, it’s terribly difficult for us to give persuasive evidence about what we knew and didn’t know because documents have disappeared and our memory has faded and so on”.

We are placed in a very paradoxical position. That is why abuse of process is not merely about the fairness of the ultimate hearing but it is about whether the continuation of the proceedings when we are in such a position not of our making is an abuse of process and reflects badly on the administration of justice. We say we should not have to be in a position of simultaneously seeking to persuade the Court of the strength of our evidence whilst at the same time having to persuade the Court that our evidence is not strong because of loss of memory, loss of documents and the like and we say that quandary, that paradox, is an affront to the administration of justice and not of our doing. This is all the liquidator’s unilateral forensic decision that he did not want to involve us in the first set of proceedings, he did not even tell us about them, notify us, put us on notice about anything. We lived in blissful ignorance, we submit, until the writ arrived on our desk seven years later.

CALLINAN J: Fifteen years – no, longer after the event, was it not?

MR HILTON: I am sorry, more than 15 years afters the events in question, more than seven or eight years – however one does the maths – after the liquidator at the latest knew what he knew. And, your Honour, there is another point that often escapes notices when one is considering the facts of this matter which is undisputed. Your Honours may be interested to know that when the liquidator kicked off the first set of proceedings he concentrated only on the Nelson Wheeler accountants which went on appeal to the court.

They joined the directors as third parties. It was only when they joined the directors as third parties that the liquidator included the directors as defendants, making the same allegation as Nelson Wheeler. So, the inference is available. In truth, he was not even focusing on the directors for quite a while. He is the liquidator, he had all the documents. He probably did not bother to read them. Be that as it may, your Honours, we submit this unique concatenation of factors demonstrates abuse.

The next question of principle, your Honours, which we submit is fundamental is we submit this alleged distinction between what is called actual prejudice and what his Honour the Chief Justice found of a substantial risk of significant prejudice is either an incorrect distinction in law in the present context or, alternatively, a distinction without a difference. We submit there are authorities of the Court, including a statement of Justice McHugh in Taylor’s Case, cited at length in the courts below where his Honour said:

When a defendant is able to prove that he or she will not now be able to fairly defend him or herself or that there is a significant chance that this is so, the case is no longer one of presumptive prejudice . . . In such a situation, actual injustice to one party must occur.

In Jago’s Case, Justice Deane spoke of “proven or likely prejudice to the accused” as a relevant factor bearing on a stay of criminal proceedings, so we submit we proved enough.

CALLINAN J: Mr Hilton, if you have available a defence of limitations by analogy, when would the relevant limitations period have ended?

MR HILTON: Your Honour, as I understand that which is put against me, there is no end to the limitation period.

CALLINAN J: I understand that because they say it is equitable fraud, I think, or it is fraud.

MR HILTON: That is right, there is no end to it.

CALLINAN J: What analogy would you wish to draw in your defence? What have you pleaded?

MR HILTON: I plead, of course, six years.

CALLINAN J: Six years. On the basis of what, what cause of action?

MR HILTON: I plead on the basis of relying on those United Kingdom cases upon which my learned friends rely. I rely on, effectively, torts – the tort of conspiracy to defraud or deceit and so on.

CALLINAN J: So that if you are right about that, the limitations period would have ended in 1993?

MR HILTON: It either ended in 1993 or it ended in 2001 but in South Australia your Honours will know, effectively the courts below say that it is subject to indefinite extension under the statute.

CALLINAN J: Is not that a relevant factor even if that defence is only reasonable arguable? Is it not relevant to the question of oppression and abuse of process that you may have lost even a reasonably arguable defence?

MR HILTON: Yes, most certainly, your Honour.

CALLINAN J: Does the Chief Justice or the Full Court take that into account?

MR HILTON: They did not, your Honour. Your Honours, the fundamental submission of principle is that, with respect to their Honours, the judgments below were almost Kafkaesque because they are constantly telling us, “Well, it’s not enough, it’s not enough. We’re not satisfied”, but we are never actually told precisely what it is that will be enough. It is like Kafka in pursuit of the castle; it is there but he never gets there. It is always hanging over as this thing in the distance to be sought after but always in vain. The judgments below smack of that, in our respectful submission.

We submit we proved enough. What the courts below characterised as speculation we submit are ordinary inferences from human affairs that, for example, if you had notes - we proved that our key witness had kept notes, detailed notes as in a day book, of these transactions which he lost because he moved house 10 times, knew nothing, moved house, did not have the notes any more. We have lost below on this ground of oppression because we could not prove in fact that those notes would have made a difference to us. Of course we cannot because we cannot remember now what were in the notes written in 1987.

GLEESON CJ: I think you have told us that as a result of your failure before the Court of Appeal the action is now proceeding and you have filed a defence.

MR HILTON: Yes, your Honour.

GLEESON CJ: Have pleadings been closed?

MR HILTON: No, your Honour.

GLEESON CJ: When did you file your defence?

MR HILTON: About a week ago, and there are replies.

GLEESON CJ: When was your application dismissed by the Court of Appeal? In what month of what year?

MR HILTON: March of this year, your Honour, I am told. I will just check that. 11 March 2005.

GLEESON CJ: When were you due to file your defence?

MR HILTON: We filed our defence on 1 August and I think we filed it on 3 August.

GLEESON CJ: I am terribly sorry. When were you due to file your defence?

MR HILTON: I am sorry, your Honour, on - - -

GLEESON CJ: The Court of Appeal dismissed the appeal on a date in March.

MR HILTON: That is correct, your Honour.

GLEESON CJ: When were you due – I underline the word “due” – when were you to file your defence? Did you have four months to file your defence?

MR HILTON: Yes, your Honour, because it was the subject of directions before a directions judge and specific directions were made for the filing of the defence.

GLEESON CJ: Is there a judge who is managing the trial of the case?

MR HILTON: There is, your Honour. His name is Justice White. I am sorry, your Honour.

GLEESON CJ: Right. What does Justice White say about when the pleadings will be closed?

MR HILTON: He, as I understand it, has made a direction about a time for filing of replies and the matter has been relisted before him on 30 August.

GLEESON CJ: Do you have any indication from Justice White when the trial will come on for hearing?

MR HILTON: I do not, for this reason, your Honour, because the next matter on the agenda is cross-claims and there will be many cross-claims, with the people who will be very difficult to locate and that will take quite a substantial time to file those cross-claims, then there have to be defences to those cross-claims and discovery. A trial in this matter will not occur, in my respectful submission, literally for years.

CALLINAN J: And millions of dollars afterwards.

MR HILTON: Your Honour, for example – I know the light is on, I will just make another point – we are only beginning, now, to discover what is going on in relation to this transaction on which we are sued. There are
many other people, some of whom are now dead, who were involved in this transaction and we did not know about them and they are situated all over the world. We are talking here for a forensic contest involving issues that – we know that some of the documents have disappeared - that was established – but the people who are on the other side of this transaction are located in Germany, in the United Kingdom, companies have gone or changed their names, people have died. It is a forensic nightmare and morass which will involve the expenditure of many millions of dollars. The only reason all this is happening, in our respectful submission, and we submitted below, is that at the beginning of 1998 in blissful ignorance of all of this my client, which is a bank, took over Hambros and gave a guarantee of its liabilities. The liquidator saw that in one of our annual reports and said, “Aha, I’ve got a balance sheet I can now chase of a third party”. That is our submission.

GLEESON CJ: Thank you, Mr Hilton. Yes, Mr Wells.

MR WELLS: If the Court pleases. I propose, first of all, if I may, to remind your Honours of some but not all of the positive findings that were made by the learned primary judge. If your Honours were to take up the application book, can I invite your Honours’ attention to these particular findings. First of all, on page 10 of the application book, paragraph 43 his Honour finds that the defendants were given no notice of the institution or the proposed institution of these proceedings and that there was no good reason why the liquidator could not have done so bearing in mind his Honour’s finding that the liquidator was in possession of sufficient facts about the matter from 1994 and certainly no later than the middle of 1995. Notwithstanding that, no notice of any intention, the proceedings then being commenced on 30 November 2002.

Next, paragraph 48 on page 11, where – this is my summary - his Honour says that whatever the position is now things can only get worse by the time we come to a trial. And, although I do not go to them, paragraphs 89 and 90 emphasise that that includes not only memory loss and lost documents but also missing witnesses and, as I say, his Honour appreciates that however he now assesses it, it can only get worse and never get better.

Next, if I can take your Honours to paragraph 162 on page 34 of the application book. This is a summary of his Honour’s positive and negative findings. His Honour was:

not prepared to find that the defendants will in fact suffer significant prejudice attributable to the delay –

but his Honour was prepared to find that the defendants would have a substantial risk of a significant prejudice by reason of delay and if we add to that that his Honour is there talking about risks that include risks of prejudice that cannot be quantified.

Your Honours will see that in paragraph 92 on page 17 of the application book where his Honour explicitly refers to “prejudice that cannot be quantified”. In paragraph 93 his Honour explains his understanding of prejudice, for present purposes, as being “in a sense of an inability fairly to defend the claim”.

GLEESON CJ: What about paragraph 165 on page 34?

MR WELLS: Your Honour, this raises the issue about when the matter should properly be determined.

GLEESON CJ: Yes. We are in the situation forensically, Mr Wells, where there are concurrent findings of the primary judge and the Court of Appeal to the effect that is set out in negative form in paragraph 170 on page 35, but we have the primary judge and then the Court of Appeal taking the attitude that the question of prejudice that has resulted from the delay can only properly be assessed at a trial. Suppose you are given leave to appeal and the matter comes on in this Court in six months time or so. Are we going to be sitting assessing the prejudice before the trial in circumstances where the courts in South Australia have said, “We can’t comprehensively assess the prejudice at this preliminary stage of the proceedings”?

MR WELLS: There are two answers to that, your Honour. They are combined. The first is that the question, we submit, for this Court is whether the finding of the learned primary judge is in accordance with principle sufficient to establish an abuse of process, so this Court would not be exploring anything more than the learned primary judge already has.

GLEESON CJ: But the primary judge has said, “I do not know the extent of the prejudice suffered by these defendants as the result of the delay”, and the Court of Appeal has said, “Neither do we”. Where does that leave us on an appeal?

MR WELLS: In two positions, your Honour. First of all, it leaves the Court knowing not only that the primary judge has not been able to make an assessment of prejudice but that the primary judge recognises and accepts that he cannot make an assessment of prejudice since it is unquantifiable. It is not now possible to make the assessment.

GLEESON CJ: No, he did not say that. He said it cannot be assessed in these preliminary proceedings. What we are dealing with was an application to send these plaintiffs packing before even a defence had been filed.

MR WELLS: Yes.

GLEESON CJ: To this day, we have never seen the defence.

MR WELLS: Your Honour has not seen the subsequent statement of claim either because subsequently to the decision of the Full Court, there was a substituted statement of claim allowed by - - -

GLEESON CJ: None of that is within our knowledge and it would not be within the knowledge of the Court if we granted leave to appeal.

MR WELLS: No, quite so.

GLEESON CJ: Paragraph 165 is a matter that you really have to come to grips with.

MR WELLS: Your Honour, we come to grips with it in this way. The proposition that we say is a principled exercise of the jurisdiction that every court has to prevent abuses of process is this, that if according to ordinary notions of fair trial a defendant in a civil action cannot be assured of a fair trial which includes an ability fairly to defend the claim, then its continuance would constitute an abuse of process however reasonably the plaintiff may have conducted itself.

The point, your Honours, in civil proceedings – and this Court has not considered the exercise of this jurisdiction in the case of civil proceedings between citizens - - -

GLEESON CJ: I know. This claim of unfair prejudice often arises in cases of people defending criminal allegations made against them in respect of events that happened 30 years ago.

MR WELLS: Yes indeed, your Honour.

GLEESON CJ: Consider Polyukhovich 50 years ago.

MR WELLS: Yes. Your Honour, again, the question is - - -

CALLINAN J: The law has always taken a different view of crime. There is no statute of limitations against crime. People arrange their affairs upon the basis that nothing is going to happen without any thought of litigation, and then years afterwards they are confronted with litigation.

MR WELLS: The legislature has recognised that, your Honour, in the way in which it has provided for limitations.

GLEESON CJ: And provided for defences of laches and delay, and those defences are usually fought out at trial.

MR WELLS: They are, your Honour, although it has to be said that more often than not the examples of where laches are fought out at trial are examples of a trial that might last, if they are lucky, two days and not nine months or more, as we expect this one will. Your Honour, we are faced, in that sense, with a stark example of how prejudice and the risk of prejudice raises itself an abuse of process.

GLEESON CJ: Was it put to the Supreme Court of South Australia either at first instance or on the Court of Appeal that, to use an expression I used a little earlier, they ought to send these plaintiffs packing on considerations related to straight-out case management?

MR WELLS: I am reminded from the right, your Honour, that a submission to that effect was put. It raised, as it were, another aspect of this and that is a number of issues which put the court to the great expense and time use of over 450 days - - -

GLEESON CJ: We are dealing with a discretionary decision here, and maybe that is an important thing for us to consider, but I have met some commercial judges in my time who would have responded to this litigation with considerable ferocity.

MR WELLS: Yes. We have, your Honour, with respect, invited the court, both at the primary level and on appeal, to respond with some ferocity in that respect, given what has happened, given well over a decade of the history of litigation in which – we cannot I think put it quite as strongly as the plaintiff sweating off on us until the case before has been completed and further moneys secured, but there is more than just a hint of that, given that the plaintiff was in a position to not only know but to take some steps in relation to action against us almost a decade before they actually did.

If I can come back to the other aspect of what your Honour the Chief Justice has put to me. Our point is substantial risk of significant prejudice is itself a principal ground for intervening and preventing the conduct of the trial for abuse of process. What paragraph 165 says to us, your Honours, in this case is that it is an acceptable exercise of the jurisdiction to require a defendant at substantial risk of significant prejudice through delay, including unquantifiable prejudice, to submit to a trial of not less than six to nine months in order to determine if there should be a trial. Your Honours, we submit that that threatens the standing of the court in the eyes of the community.

GLEESON CJ: I am not sure that saying that you are considering a defence of laches in order to determine whether there should be a trial is a fair statement of the defence of laches.

MR WELLS: No, your Honour, but it is a fair statement in relation to the quite different principles – and we submit they are different principles – that relate to abuse of process. Laches concentrates on particular inequity, and there may well be the case that there is some overlap of principle between the inequity that the defence of laches identifies and the principles that underlie the exercise of the jurisdiction to prevent abuse of process, but they are not coextensive and there are other considerations including very important public interest considerations that come into play when considering the jurisdiction to prevent abuse of process that does not arise with laches.

GLEESON CJ: Mr Wells, this may be a question for your opponent - I will ask her too - but for whose benefit are these proceedings being conducted?

MR WELLS: Your Honour, as we understand it, the plaintiff company has long since achieved solvency. All the creditors, we understand, have been paid 100 per cent, and the liquidator continues to run this action for the benefit of the company and its shareholders.

GLEESON CJ: Why is the liquidation still in process?

MR WELLS: Well, your Honour, it is a question we have asked.

CALLINAN J: Mr Wells, on the basis that this is a discretionary judgment, what do you say are the errors in the exercise of the discretion?

MR WELLS: I will identify them immediately, your Honour, but can I say that we take respectful issue with your Honour’s suggestion that it is simply a discretionary judgment.

CALLINAN J: Well, that may well be so, and I understand what you say about that, but assume for present purposes it is.

MR WELLS: Certainly, your Honour. Paragraph 170, that your Honour the Chief Justice adverted to before, identifies two fundamental errors, we respectfully submit, in the principal exercise of this jurisdiction. Might I just say that this passage is approved by the Full Court in paragraphs 154 and 155 of their Honours’ judgment, page 91 of the application book, but the two errors that we identify are these. First of all, his Honour says:

I am not satisfied that the delay that has occurred, in light of the explanation for the delay –

can I just pause mid-sentence. Our submission is the explanation for delay in relation to matters of abuse of process will only be relevant if it is an abusive purpose, that is where the Williams v Spautz principle might apply - - -

CALLINAN J: Well, there does not seem to be any explanation for the delay really, anyway.

MR WELLS: Your Honour, the explanation that was accepted by the learned primary judge was simply that the liquidator had his hands full running another case.

CALLINAN J: The liquidators are not liquidators of just one company normally. They are doing all sorts of things and they have to carry on a number of different activities. They might have to put on some more staff.

MR WELLS: It may be his Honour was impressed with the size of the case as it developed in the Supreme Court.

CALLINAN J: Well, if you want to be in the big league of liquidators you might have to run big cases and you might have to run more than one at a time.

MR WELLS: But we would contend, your Honour, that the relevance of any explanation for delay is to be challenged. Where we are dealing with the nature of abuse of process that we are dealing with here, that is, can the defendants be assured that they will have a fair trial, explanation for delay ceases to be a relevant consideration at all. His Honour then goes on to say:

coupled with the risk of prejudice –

Now, that has to be seen in the light of paragraph 162, where his Honour said:

I am not prepared to find that . . . significant prejudice attributable to the delay - - -

CALLINAN J: But it is inescapable with the takeover of Hambros. Third parties have intervened. It must be prejudice to the third parties, who are now the defendants effectively.

MR WELLS: That is, we respectfully submit, how the matter, if it is allowed to continue, will develop.

CALLINAN J: And all the defendants on the cross-claims, they are going to be prejudiced too.

MR WELLS: And hence perhaps his Honour’s recognition earlier in the judgment that it can only get worse.

CALLINAN J: And if they are prejudiced, your rights and Mr Hilton’s clients’ rights of obtaining an indemnity or contribution are going to be greatly prejudiced too.

MR WELLS: Will likewise be down the chain, yes, your Honour. But we identify in this passage that particular error, that his Honour requires and requires only that there should be shown to be before this trial actual prejudice which, as your Honour the Chief Justice has pointed out, his Honour says, “If that is the test we can only find that out once we have a trial”, but hints the error, we submit, that exists. If his Honour’s finding is as it appears, a substantial risk of significant prejudice, then that itself constitutes the necessary and sufficient condition for bringing the proceedings to a halt, in our respectful submission, and that requires a principled exercise of the jurisdiction to prevent abuse of process.

It is on that basis that we contend the special leave. I might say, if the Court pleases, that we respectfully adopt the submissions that have thus far been put by my learned friend, Mr Hilton. If the Court pleases.

GLEESON CJ: Thank you, Mr Wells. Yes, Ms Harris.

MS HARRIS: If the Court pleases. In our respectful submission, what the applicants seek in this case is for this Court to take an extraordinary step. They say that this Court should hold that the proceedings should have been stayed by the court below as an abuse of process in circumstances where there were concurrent findings below that there had not been an unreasonable delay by the liquidator – and, with respect, I will come back to that point because I know it is a point that concerns your Honours - - -

CALLINAN J: Why can we not assess that? There is no doubt about the key dates, is there?

MS HARRIS: With respect, your Honour - - -

CALLINAN J: Is there any doubt about the key dates?

MS HARRIS: Yes, your Honour, because - - -

CALLINAN J: Well, what are the doubts?

MS HARRIS: Your Honour’s question to my learned friend Mr Hilton shows that there is at least a doubt in your Honour’s mind about the key dates. I think what was put by Mr Hilton to your Honour was that by 1995 the liquidator had all the information he needed in order to bring these claims. Nothing could be further from the truth, based on the findings that have been made by Chief Justice Doyle and accepted by the Full Court, and based on the unchallenged evidence given by the liquidator. The liquidator’s evidence was that he did not even know about the Autocure transaction until Mr Ewart-James was called to give evidence in the proceeding in July 1995. He did not even know about the transaction. Mr Ewart-James was called by the Nelson Wheeler partnership. He was not called by the liquidator. That was the first the liquidator knew about it.

Then Chief Justice Doyle makes some findings about that that I would like to draw the Court’s attention to. Can I take the Court to page 9 of the Court book. Chief Justice Doyle referred to the fact that Mr Ewart-James gave evidence and he was cross-examined. Then at paragraph 40 Chief Justice Doyle said:

Had the liquidator then initiated the necessary investigations and procedures, including the examination of persons involved, he could have been in a position to institute these proceedings by about the middle of 1997.

Your Honours will see the qualification:

Had the liquidator then initiated the necessary investigations . . . including the examination of persons involved, he could have been in a position –

His Honour makes the matter clear at line 30. He says:

I am not finding that the liquidator should have instituted these proceedings by the middle of 1997.

CALLINAN J: Well, why not?

MS HARRIS: Because, your Honour, at that stage he had not done the work that was necessary - - -

GLEESON CJ: Well, presumably if it is – you have leapt over paragraph 40 to go to paragraph 42. The explanation, whether it is good, bad or indifferent, is given in paragraph 41, is it not?

MS HARRIS: Your Honour, that is right. It actually starts at the top of the page. The conclusion assumes that it would have taken about two years to perform the necessary investigations, and his Honour says in paragraph 41, “It was reasonable”. He finds as a fact:

It was reasonable for the liquidator to continue to concentrate his attention and resources - - -

CALLINAN J: What about paragraph 43?

MS HARRIS: I want to take your Honours to that, but that addresses a slightly different point. The question that has been put is whether the liquidator was in a position to bring the action earlier, and it has been said that the liquidator was in a position to bring it in the middle of 1995, and on the unchallenged findings of Chief Justice Doyle that is simply not correct. He does find that there was no good reason why the liquidator could not have given notice earlier, but he does not find that that notice should have been given. Your Honours will be aware from reading the balance of the judgment that there were all sorts of reasons why the present defendants were at least potentially on notice about these claims.

Mr Ewart-James gave evidence in the Autocure proceeding. Mr Corcoran gave an affidavit to the liquidator in 1999. The applicants for whom Mr Wells acts were examined by the liquidator in 2000. The matter was obviously the subject of the Duke v Pilmer proceedings, and public findings were made by Justice Mullighan about the Autocure transaction in those proceedings. So it is incorrect to characterise this as a bolt out of the blue that arrived in November 2002; that is just not right.

Can I also draw the Court’s attention to the findings of Chief Justice Doyle in paragraph 46. This is after his Honour had said:

acting reasonably, the liquidator could have instituted them some three or four years sooner than he did . . . he could have given notice.

Then his Honour says:

In making these findings I make no criticism of the liquidator. My findings are no more than a conclusion that . . . the proceedings could have been instituted sooner -

and it is hard to think of a case where the same remarks might not apply, albeit that this is an unusual case.

CALLINAN J: Let me ask you this question, a matter that troubles me. His Honour keeps on referring to the risk of prejudice. I would have thought that the fact that there would definitely be prejudice was established. One might argue about the extent of it, but to describe it as only a risk of prejudice seems to me, with respect, to be an understatement.

MS HARRIS: Can I put two matters to your Honour in that context. Firstly, it is put against us that there was some rigid sort of dichotomous approach taken by the courts below to actual prejudice on the one hand against risk of prejudice on the other. With respect, that is not what happened. What happened was that the court below simply was not able to say what prejudice might accrue to the defendants at this stage - - -

CALLINAN J: But notes have been destroyed, witnesses have died, documents have been destroyed and lost. That must produce prejudice. As I say, one can argue about the extent of it, but to say that it is a mere risk of prejudice does seem to me to be an understatement and possible error.

MS HARRIS: Well, it depends, does it not, your Honour, on what information is now missing and unavailable, and that is what Chief Justice Doyle was unable to say because at the same time as - - -

CALLINAN J: What about Mr Corcoran? Mr Corcoran kept detailed notebooks. He has discarded them. That is paragraph 58.

MS HARRIS: He did, but Chief Justice Doyle finds at paragraph 59 that Mr Corcoran “had a good recall of the relevant events” when he gave his affidavit in 1999. Not only that but Chief Justice - - -

CALLINAN J: It is one thing to give an affidavit and another thing to acquit yourself well in cross-examination when the events are remote in time. You are dependent probably entirely upon your affidavit, which may not detail with all the nuances of matters raised in cross-examination.

MS HARRIS: That might be so, your Honour, but, with respect, your Honour would also bear in mind the fact that Chief Justice Doyle made extensive findings about the amount of documentation that still remains. Without examining that documentation and assessing whether it is possible that there are things in Mr Corcoran’s notes that were not covered by that extrinsic material, it is impossible to say that Mr Corcoran is prejudiced in his ability to prepare his defence. There is a substantial amount of documentation that has been preserved.

CALLINAN J: Lots of cases talk about prejudice because of the mere passage of time, and it is difficult to disagree with that.

MS HARRIS: Your Honour, rare is the case that is tried where the documentary record is pristine and intact. Rare is the case where witnesses do not suffer from some degree from lapse of memory.

CALLINAN J: That is one of the reasons why there are limitation periods.

MS HARRIS: Indeed, your Honour. That argument remains open to my learned friends to run. While the Full Court and Chief Justice Doyle have not identified what, if any, limitation period might apply to this claim, that is a matter which remains on the table and will be argued and may make its way up to this Court again in the fullness of time, but it will do so once this Court has the benefit of firm findings of fact and the benefit of the opinions expressed not only by a judge at first instance but also by a Full Court.

Your Honour put to my learned friend Mr Hilton that the defendants would now be precluded from running some abuse of process argument, and we are not - - -

CALLINAN J: No, I was asking him what the position was. What do you say the position is?

MS HARRIS: Well, each of the defendants has pleaded an abuse of process in their defence - - -

CALLINAN J: But you will no doubt in your reply say that that matter is decided against them.

MS HARRIS: Your Honour, I am not sure that I can. I could certainly say that if they brought the application tomorrow because there is nothing fresh, but the essence of what was decided by the court is that at this stage we cannot make findings of prejudice - - -

CALLINAN J: I must say – and I am not suggesting you should – that if you made that concession, that would be from my point of view the end of the application for special leave. If you made the concession that that defence was still open, I could not see any basis at all then for granting the application for special leave.

MS HARRIS: Your Honour, I am getting some instructions on that.

CALLINAN J: You do not have to.

MS HARRIS: I understand, your Honour.

CALLINAN J: I do not want to put you in that position, but I am just saying what it would be from my point of view.

MS HARRIS: At least at this point, your Honour, I can say that the matter has been raised by the defendants. Your Honour will have heard that my learned friend Mr Wells has been anxious to emphasise the fact that the continuation of the proceedings is an abuse of process. There is a question whether the continuation of the proceedings is an abuse of process. There might be a separate question whether the trial itself is an abuse of process.

GLEESON CJ: I would have thought there might even be - and I am not saying this categorically - a question relevant to the issue of abuse of process that is not before us about the current circumstances of the liquidation. For whose benefit is this liquidation being continued? For whose benefit is this litigation being conducted? I say this very tentatively, but I would have thought that that could possibly be relevant to the wider question of abuse of process.

MS HARRIS: Can I tell your Honour this, and these are matters of public record because they have been before this Court in recent times. The liquidation is continuing. Payments have been made to creditors, claims for interest by those creditors have also been addressed, but I think I am right in saying that they have not been completely satisfied. I understand $50 million is still owed to the creditors – that is in post-liquidation interest, your Honours – and shareholders of course are still waiting in line for their share. Those are matters of public record. The question of the way in which the liquidator should deal with post-liquidation interest was considered by this Court in the last 12 months. So to the extent that that answers your Honour’s question, that is what I can say.

GLEESON CJ: You will have read a fairly recent judgment of this Court in a South Australian appeal in which there emerged in the course of argument, and was the subject of comment in our judgment, some considerable curiosities about the nature of a particular claim that was being mounted by a liquidator.

MS HARRIS: Yes, your Honour. There is no evidence – and my instructions are that what I put to your Honours about the purpose of this claim are accurate and there is no reason for your Honours to think otherwise.

GLEESON CJ: No, I only raise that because of the discussion that you embarked on in relation to what I will call the scope of this extant defence of abuse of process.

MS HARRIS: Yes. Your Honour, I am instructed to make the concession that we have always proceeded on the basis that the door was not closed in respect of abuse of process. If events pan out as my learned friends say they will and they will be seriously hampered, in the conduct of the defence of these proceedings we could not resist another application. It might succeed and we reserve the right to say that it is not an abuse of process.

CALLINAN J: It might be made even at the end of the case, or halfway through the case, but in any event you concede that the defence is not foreclosed by what has occurred so far?

MS HARRIS: I do concede that, your Honour, and I could not do otherwise, with respect, because of the nature of the findings that have been made by Chief Justice Doyle. He says, “I can’t tell you at this stage whether there is a risk and the size of that risk. The nature and extent of it is something I just can’t gauge”, and that is why it is not appropriate at this moment to terminate summarily an otherwise legitimate claim that has been brought before the Court. If the Court were to accede to what is being suggested by the applicants that this Court should do, it would involve an extraordinary extension of the law and would be antithetical to the notions of abuse of process.

Your Honours, might I just clarify one thing I said at the start of my address in relation to the Autocure transaction. The evidence of the liquidator was that prior to 24 July 1995 he did not believe the Autocure transaction had assumed any significance at all, it had not been referred to in Nelson Wheeler’s defence, and the first time it was mentioned was in June 1995 when counsel for Nelson Wheeler indicated in his opening that Ewart-James would be called. So obviously between June 1995 and July 1995 when Mr Ewart-James was called, the liquidator was in a position to gather some information and ask him a few questions, but it is certainly not the case that he was in a position then to launch some proceedings.

Might I also just say one thing about the findings below in relation to degree of prejudice. It has been pressed upon your Honours that what Chief Justice Doyle found was a substantial risk of significant prejudice, and my learned friend Mr Wells relies in this regard on paragraph 162 of his Honour’s judgment at page 34 of the application book. A fair reading of his Honour’s judgment does not establish such a finding. With respect, Mr Wells’ formulation is a mashing together of several ideas expressed by his Honour. What his Honour says throughout the judgment is that there is a risk of prejudice in certain areas, but he also says that that risk is ameliorated by various factors, including the fact that these matters were explored before Justice Mullighan, by the fact of the examinations and by the retention of substantial documentary material.

It was also put to your Honours by Mr Wells that it is irrelevant to inquire what were the reasons for the liquidator to wait so long in bringing these proceedings. Your Honours, in my respectful submission, that is inconsistent with Walton v Gardiner. That contemplates the existence of a balancing exercise where all relevant matters are going to be taken into account before it will be concluded that the proceedings are an abuse of process. As your Honours please.

GLEESON CJ: Thank you, Ms Harris. Yes, Mr Hilton.

MR HILTON: Your Honours, regarding the delay in the commencement of proceedings, and that which my learned friend put to you about the liquidator’s conduct, the Chief Justice made findings not at paragraph 40 at which my learned friend started, but at paragraphs 38 and 39 on page 9 of the application book. Whatever the liquidator might have said in his affidavit, his Honour found, as was the fact, that he received the document in July 1994 that told him about the Autocure transaction. So at paragraph 39 there is a finding about what the liquidator knew about this transaction, which demonstrates the correctness about which I put to your Honours.

So far as the issue of abuse of process is concerned, we say this. We submit that on the findings that the Chief Justice made, the substantial risk of significant prejudice, and on the case management point that we put, that we should have been included in the earlier proceedings, the continuation of the proceedings from that point on was an abuse. It is not just for the answer, in our submission, to the point, “Well, you can just raise it in your defence and have a whole trial and it can be argued out of trial, so what difference does it make?” Our submission is that it is an affront to the administration of justice if the continuation of the proceedings would be an abuse.

GLEESON CJ: Is there an issue of Anshun estoppel floating around here somewhere?

MR HILTON: Yes, there is, your Honour, and it was raised.

CALLINAN J: Well, I do not know whether it is available now in view of the concession that has been made. It is a very important concession that your opponent has made.

MR HILTON: When your Honour refers to Anshun estoppel - - -

GLEESON CJ: By Anshun estoppel I had in mind what you called and what I think I earlier called a case management aspect of the matter. I
would imagine that one of the arguments that your side is running is that these claims should have been promoted in the earlier case.

MR HILTON: We are running that in - - -

GLEESON CJ: Yes. I was just wondering whether you do not get some support for that argument, not of any particular relevance to this application but in your case on what I will describe as the merits from Anshun. That, I presume, is a live issue.

MR HILTON: Very much so, but our submission is that - your Honour talked about case management. That is why we submitted our written submissions, and we submit to your Honours that is the other fundamental error of principle that was made, which is found in the concluding paragraph of the Chief Justice’s judgment at paragraph 171. We submit that Anshun issue – or perhaps a Henderson v Henderson issue, an extension of Henderson v Henderson, we submit that issue goes to an abuse of process which can and should have been dealt with then and there.

GLEESON CJ: I am probably guilty of this myself on occasion, but sometimes you can unfairly diminish the significance of a proposition by treating it as a matter of case management. Some people would be tempted to add the word “mere” before “case management”. It is very important. It is possible to regard the Anshun principle as a kind of aspect of case management.

MR HILTON: We so submitted, and we submitted that the Anshun issue is not just a matter of defence, it is a matter of abuse of process. We submit it is material to the exercise of discretion at the lowest, within House v The King, the matters in 171. We submit there was absolutely fundamental error in the exercise of discretion in discounting as immaterial that which appeared in paragraph 171, namely the existence of the earlier proceeding.

So, your Honours, yes, the concessions can be made and this can be made and that can be made, but the issue of principle is whether there was an error in the exercise of discretion, bearing in mind that the continuation of these proceedings over the next few years involving the expenditure of who knows how much and the distress and all the rest of it to individuals – it is not just companies, but individuals – whether they should be allowed to continue, and that is the issue of principle for this Court, in our respectful submission.

GLEESON CJ: Thank you, Mr Hilton. Yes, Mr Wells.

MR WELLS: Your Honours, I wonder if I can address your Honours from where I stand.

GLEESON CJ: Yes.

MR WELLS: Your Honours, my learned friend Ms Harris suggests that the submission that we make is inconsistent with Walton v Gardiner. Our submission on the contrary is that that is the very reason why this Court should take this matter in hand.

GLEESON CJ: Yes, but Walton v Gardiner was a very straightforward case factually, Mr Wells.

MR WELLS: In relation to disciplinary proceedings, and the majority of this Court in Walton v Gardiner, your Honour, made the point that whereas Jago had considered what are the relevant matters to take into account on an abuse of process application in relation to criminal proceedings, in relation to disciplinary proceedings adaptations had to be made in order to identify what were the relevant considerations, and our submission is so here. Although this in a sense belongs to a much more general field, namely civil proceedings, nevertheless this Court has not identified what are the relevant adaptations that must be made to the Jago principle which would therefore identify the principled exercise of the jurisdiction in a civil proceeding.

Your Honours, the other point that we make in reply is that it is not clear to us, with great respect to my learned friend, that the concession that she makes is unattached with conditions. We may have misheard it, but - - -

GLEESON CJ: Well, it is in writing. It is on the record.

MR WELLS: Yes, if your Honour pleases. Those are our matters in reply.

GLEESON CJ: Thank you, Mr Wells.

Although there are aspects of this case that we find troubling, having regard to the concurrent findings in the Supreme Court of South Australia we think that there are insufficient prospects of success of an appeal to warrant a grant of special leave. The applications are dismissed with costs.

AT 10.37 AM THE MATTERS WERE CONCLUDED